COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE EVALUATION of Decision No 778/2013/EU of the European Parliament and of the Council of 12 August 2013 providing further macro-financial assistance to Georgia
Date: 2019-12-17
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU aid, EU loan, European neighbourhood policy, Georgia, economic reform, economic stabilisation, financial aid, macro-financial assistance

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   EUROPEAN COMMISSION  Brussels, 17.12.2019  SWD(2019) 449 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE EVALUATION of Decision No 778/2013/EU of the European Parliament and of the Council of 12 August 2013 providing further macro-financial assistance to Georgia {SWD(2019) 447 final}  
 
 
In  August  2013,  the  European  Parliament  and  the  Council  approved  a  Macro  Financial 
Assistance (MFA) operation of EUR 46 million to Georgia. This was the second of the two 
operations pledged by the EU at an International Donors’ Conference in Brussels in October 
2008,  after  Georgia’s  armed  conflict  with  Russia.  Together  with  the  hit  from  the  global 
financial crisis, the conflict with Russia put the Georgian economy and its external financing 
under severe pressure, which necessitated international financial support. 

The  aim  of  this  ex-post  evaluation  of  MFA  is  to  assess  the  relevance,  efficiency, 
effectiveness, coherence, and EU value added of the MFA-II operation to Georgia, which was 
implemented  in  2015-2017.  It  also  explores  the  social  impact  of  MFA  and  its  effect  on 
Georgia’s public debt sustainability and sets out to draw lessons. The ex-post evaluation has 
been conducted by an external contractor and draws on evidence gathered through a variety of 
quantitative  and  qualitative  research  techniques,  including  desk  research,  interviews  and  a 
focus  group discussion with  a wide range of stakeholders, as well as a validation workshop 
with stakeholders closely involved in the design and implementation of the programme.  

The purpose of this  evaluation is  also  to  inform  the future use of the MFA instrument.  The 
evaluation  also  ensures  transparency  and  accountability,  in  accordance  with  the  Financial 
Regulation and the MFA decision for Georgia.1 

The evaluation finds that MFA-II was relevant in terms of its objectives, financial envelope 
and structural conditions. It sought to alleviate short-term external financing pressure, which 
was  present  both  in  2011  (when  the  Commission  submitted  its  proposal  to  the  EU  co-
legislators)  and  in  2014  (when  the  Memorandum  of  Understanding  was  negotiated  and  the 
implementation  started).  The  overall  design  of  the  operation  allowed  a  swift  first 
disbursement  and  covered  the  most  relevant  reform  challenges  in  Georgia.  The  evaluation 
finds  that  some  additional  policy  measures  in  healthcare  and  banking  could  also  have  been 
relevant, yet this has to be balanced with the need to keep the list of MFA conditions focused. 
Some of these measures have subsequently been included as policy conditions in the current 
MFA operation to Georgia approved in 2018.  

The  amount  of  MFA-II  was  appropriate  (in  terms  of  burden  sharing  with  other  donors), 
proportional  (limited  to  the  minimum  necessary  to  achieve  short-term  macroeconomic 
stability in Georgia) and relevant at the time of the actual disbursements (helping to close a 
financing  gap).  The  financial  terms  of  the  MFA-II  (a  combination  of  grants  and  loans)  was 
also appropriate. 

The  MFA-II  was  effective  in  helping  to  improve  Georgia’s  balance-of-payments  situation 
(notably,  to  limit  the  increase  in  Georgia’s  external  debt  and  increase  confidence  in  the 
Georgian  economy).  Moreover,  the  MFA  operation  supported  fiscal  consolidation  through 
highly concessional financial terms and policy conditions in the areas of public procurement 
and  healthcare.  Finally,  the  structural  effects  of  the  MFA  operation  largely  materialised  as 
planned, as Georgia implemented all policy conditions. 

The  MFA-II  was  designed  and  implemented  efficiently,  and  in  close  coordination  with  the 
Georgian’s  authorities,  the  IMF  and  the  World  Bank.  Delay  in  the  adoption  was  caused  by 
procedural disagreements between the co-legislators. However, the evaluation finds that this 
exceptionally  long  timeline  of  approving  the  operation  did  not  result  in  efficiency  losses, 
because from late 2010 until July 2014 and from mid-2015 until April 2017, Georgia did not 

1 Decision No 778/2013/EU (OJ L 218, 14.8.2013, p. 15–23). 

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have  a  disbursing  IMF  programme  (a  precondition  for  granting  MFA).  This  would  have 
prevented disbursements of MFA even if the operation had been approved earlier. 

The MFA-II was  a coherent part of a comprehensive package of EU assistance to Georgia, 
reflecting  a  close  coordination  of  these  interventions.  The  EU’s  added  value  was  most 
apparent  in  stimulating  the  structural  reform  process  in  Georgia.  MFA-II  also  helped  to 
mitigate  fiscal  pressures  and  resulted  in  significant  savings  due  to  favourable  terms  of  the 
assistance. MFA-II also increased the effectiveness of bilateral support that Georgia received 
from several EU Member States, by helping to create a more favourable environment for this 
support.  At  the  same  time,  the  visibility  of  MFA-II  was  relatively  low.  The  issue  of  MFA 
operational  visibility  will  be  further  examined  in  a  MFA  meta-evaluation  planned  to 
commence in 2020.  

The evaluation finds that MFA-II had an overall positive social impact. It helped to improve 
the quality and efficiency of the public healthcare services, although progress in this area is 
uneven and is being addressed as part of policy conditionality of the current MFA operation 
approved in 2018. The MFA operation also helped to smooth the macroeconomic adjustment 
path and, in this way, maintain social spending. More broadly, the MFA operation contributed 
to  restoring  macroeconomic  stability  that  supported  economic  growth  and,  hence,  had  a 
positive impact on employment, income and other social developments. 

Finally,  MFA-II  had  a  positive  effect  on  the  sustainability  of  Georgia’s  public  debt  and 
enabled  fiscal  savings.  Together  with  the  IMF  arrangements,  the  MFA  operation  helped  to 
limit  the increase in  Georgia’s public debt.  This  positive effect  materialised mainly through 
the confidence channel and the economic growth channel. The fiscal savings of around 0.3% 
GDP  resulted  from  the  very  favourable  financial  conditions  of  the  MFA  operation.  These 
savings  (compared  to  market  financing)  helped  to  smooth  Georgia’s  adjustment  path,  and 
create fiscal space for reforms and sustained social spending. 

Looking ahead, the Commission will seek to put into practice the lessons learned and further 
consider the identified limitations in the upcoming MFA meta-evaluation planned for 2020. 

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